20100324 0933 Global Economic News.

Federal Reserve Bank of Chicago President Charles Evans said the US central bank is likely to maintain an “accommodative” interest-rate stance for at least six months to support the momentum of economic growth. “I would expect it will hold for the next 3-4 meetings, that’s about six months,” Evans said. “I won’t be surprised if it carried into 2011.” (Bloomberg)

The National Association of Realtors (NAR) reported that February US existing home sales fell 0.6% to a seasonally adjusted 5.02m (5.05m in Jan), the third monthly loss in a row. Still, sales are 7% higher than in February 2009. The figures came in slightly above analyst expectations of an annual rate of 5m units. The NAR's chief economist said the rise in February inventory is 'discomforting' but still hoped for another sales surge in the April- May-June period to beat the end of tax credits. Inventory rose by 311,000 units, the strongest January-February rise in 20 years, to 8.6 months supply on the market. (Xinhua, CNN Money)

US house prices fell 0.6% on a seasonally adjusted basis in January (-2.0% in Dec 09), according to the Federal Housing Finance Agencys monthly House Price Index. For the 12 months ending in January, US prices fell 3.3%. The US index is 13.2% below its April 2007 peak. (Xinhua)

San Francisco Federal Reserve Bank President Janet Yellen made it clear Tuesday she sees no urgency for the Fed to consider tightening monetary policy, presenting a fairly gloomy outlook for employment and housing as well as minimised inflation risks. Yellen, who the White House has identified as a leading candidate to succeed retiring Federal Reserve Board Vice Chairman Donald Kohn, said there will eventually come a time for the Fed to tighten.
·    But she said that time will only come when "recovery takes firm root" and GDP growth "moves toward its potential" -- this after predicting that the economy will operate "well below its potential for several years." (Xinhua)

President Obama signed the sweeping health care legislation into law Tuesday morning, and said the landmark bill will provide necessary health insurance for millions of Americans who don't now have it while also reducing the nation's future budget deficits by US$1tr. "It is paid for. It's fiscally responsible and will end a decade long drag on our economy," Obama said. (Xinhua)

It will likely take several months to review the possible options for the future of Fannie Mae and Freddie Mac and housing finance in general, but Treasury Secretary Timothy Geithner ruled out some options Tuesday, including those that would give no role to the government.

• There is a "quite strong" economic and policy case for "continued provision of a carefully designed guarantee by the public sector going forward because housing market is so critical to overall economic activity," Geithner said. 
• He also stressed that the government "will make sure" Fannie Mae and Freddie Mac have the resources they need to meet their obligations "past and future." In other comments, he said the Treasury is looking at covered bonds as a tool that could be used more in the housing finance system. (Xinhua)

Japan’s fiscal plan to be released by June may include a numerical goal for reducing the ratio of debt to gross domestic product, National Strategy Minister Yoshito Sengoku said. “We need to consider steadily reducing the accumulated long-term public debt relative to GDP once the economy returns to cruising speed,” Sengoku said. “We need to show some sort of numerical target” in the mid-term fiscal framework, he said. (Bloomberg)

China’s inflation rate probably eased in March from the previous month, according to the National Development and Reform Commission (NDRC). The average pace of inflation for the first quarter will be between 2-2.5%, a “mild” pace, the NDRC said. (Bloomberg)

Singapore’s consumer prices increased for a second month in February as food and transport costs rose amid a regional economic rebound that has spurred some Asian central banks to raise interest rates. The consumer price index rose 1% yoy in February (0.2% in Jan). That matched the median estimate. (Bloomberg)

Taiwan’s industrial production climbed for a sixth consecutive month, boosted by rising orders for computers, mobile phones and television screens. Output advanced 35.17% yoy in February (70.08% in Jan). The median estimate was for a 37.75% gain. (Bloomberg)

Philippines reported a tenth monthly budget deficit in February as revenue declined, hurt by lower investment income and delays in asset sales. The shortfall was 33.2bn pesos (US$729m), which compares with the 29bn peso gap a year earlier. The two-month deficit climbed to 70.3bn pesos from 67bn pesos in the same period last year. (Bloomberg)

Governments must bite the bullet in the next three months and announce action to cut back huge debt and budget deficits, or put themselves deeper into trouble, the Organisation for Economic Cooperation and Development (OECD) warned. Without significant action, debt levels would continue to rise in the medium term from already high levels in a number of countries, including Japan, US and UK. (Channel News Asia)

India said it must double infrastructure spending in its next five-year economic plan to achieve 10% p.a. economic growth as it seeks to combat poverty. It will have to spend about US$1tr on improving highways, ports, airports, power plants and other infrastructure over the five years to 2016-17 to attain its growth target, Prime Minister Manmohan Singh said.

• That is up from US$500bn in planned infrastructure spending in the five years to 2011- 12. Private participation in infrastructure development is indeed a feasible proposition and can help expand infrastructure much faster than it would have relying only on public resources, he noted. (Channel News Asia)

Indonesia may scrap electricity and fuel subsidies by 2014-2015 so that energy prices reflect market levels, reducing the financial burden on the state, the Mines and Energy Minister Darwin Saleh said. “The government will carefully study the subsidy issue in consultation with parliament. Indonesians should know the real economic price for energy,” he added.

• Previously, Finance Minister Sri Mulyani Indrawati noted that spending on subsidised electricity and fuel would rise to Rp143.8tr in 2010, up from the earlier budget target of Rp106.5tr. (Financial Daily)

China will probably run a trade deficit of more than US$8bn in March, Premier Wen Jiabao said. It would be China’s first monthly deficit since Apr 04, but is expected to be a one-time blip rather than the start of a new trend for China. “To be honest, I was happy when I learnt of the situation (of the expected deficit). China is by no means seeking a trade surplus. On the contrary, we have left no stone unturned in expanding imports to achieve a trade balance,” Wen said. (Financial Daily)

Germany and France, paving the way for a European Union plan to aid Greece, agreed to involve the International Monetary Fund in any potential EU package for the debtburdened nation, a German Finance Ministry official said. (Bloomberg)

Britain might not face as “monumental” a situation as people assume if the nation were to lose its top AAA credit rating, former Bank of England policy maker David Blanchflower said. (Bloomberg)